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Monday, January 2, 2017

Previous to passing away, Taiwanese billionaire set up trusts in the United States, one of which was in Washington D.C., apparently in order to reduce the share of his estate that would go to his surviving wife. The representative for the surviving wife sued the D.C. trust after the billionaire passed away.

The district court dismissed based on lack of subject matter diversity, as there was no complete diversity. The district court held that citizenship of a trust is to be determined by referring to the citizenship of the trust's beneficiaries. The district court found that, because the trust's beneficiaries included non-U.S. citizen aliens, no complete diversity existed as both the plaintiff and the defendant were aliens.

The D.C. Circuit reversed on this issue, holding that a traditional trust takes on the citizenship of its trustee. Because the trustee was another trust whose citizenship was Virginia and Washington D.C., complete diversity existed.

Takeaway:

Quick--how many of you already knew that federal courts had no jurisdiction over litigation between two aliens? I only learned this a few years ago, and this factoid catches many attorneys by surprise.

This decision has a great deal of practical and academic implications. Citizenship of a business organization is a consistent issue in international litigation. As a theoretical matter, it is not entirely clear what purpose it serves to have this convoluted determination of citizenship for complex business organizations, other than to make corporate structures opaque and make the entities less amenable to suit?